Coal news and updates

Merger rumor boosts Chinese coal firms’ shares

A merger rumor pushed the share prices of the listed arms of two of China's leading coal groups up by the daily 10 percent limit on domestic bourses on Tuesday, but the groups said they were not aware of the merger.

The share price of China Coal Energy Co (China Coal), which is controlled by China National Coal Group Corp, closed at 11.24 yuan ($1.80) on Tuesday with a 9.98 percent daily increase and Shenhua Group Corp's listed arm China Shenhua Energy Co saw its share price jump 10 percent on Tuesday, closing at 26.29 yuan.

China Coal Energy and Shenhua Energy also saw their share prices in the Hong Kong stock market jump 7.47 percent and 3.64 percent respectively on Tuesday.

Zhou Dongzhou, board secretary of China Coal Energy, said on Tuesday that the company has not heard of or received any notice of the merger, and Shenhua Group also said they do not know if it is true, news portal caijing.com.cn reported on late Tuesday.

Amid an ongoing series of mergers of State-owned enterprises (SOEs) administered by the central government, the merger work of China Coal and Shenhua Group has started, according to National Business Daily (NBD) newspaper on Tuesday, citing unnamed sources.

The National Energy Administration (NEA) said China's coal industry should be more concentrated and more financial support should go to key coal firms, according to the NBD report.

Coal industry has been an overcapacity-burdened industry in China and the NEA released two documents on May 7 on restricting coal overproduction and closing down outdated production facilities, media reports said.

The NEA forbade coal mines to surpass their production targets and will also close 1,254 coal mines in 2015.

"The State-controlled coal industry is undergoing a difficult situation with about 80 percent of coal producers suffering losses, but the government will not watch State-owned firms die without giving a hand," Liu Jie, a coal industry analyst at Sublime China Information Group, told the Global Times on Tuesday.

North China's Inner Mongolia Autonomous Region released a notice on Thursday about reorganizing coal companies, in which the local government said that in a bid to solve the coal overcapacity, it will support the merger and reorganizing of related companies.

Some local governments have already carried out mergers and restructuring in the industry, and it is possible to see this happening with central SOEs, Liu said.

The demand for coal is falling due to an economic slowdown; meanwhile, rising concerns over air quality mean China's energy consumption is turning to gas and oil, Liu said, noting the merger of coal companies into several major ones is in line with the market trend.

In addition to weak demand, China's coal producers are also faced with high costs. For example, the coal logistics cost in China is even higher than the cost in the US, Li Chaolin, an independent coal industry analyst in Beijing, told the Global Times on Tuesday.

The market has already seen a few mergers of large State-owned companies this year as bullet train makers China CNR Corp and CSR Corp were approved to merge into one company in March while major nuclear power operators China Power Investment Corp and State Nuclear Power Technology Corp announced their merger on May 29.

In the future, with financial support from the government, coal producers may be able to upgrade their products with clean coal technology or move into other parts of the coal production chain, according to Liu.

But when giving financial support, the anti-corruption campaign should be carried out as an important part of coal industry reform, Li said.

Hao Gui, senior vice president of China Shenhua Energy Co, was under judicial investigation and cannot perform his duty, according to a company announcement on Sunday.

SOE mergers

Nov 26, 2014 China's top agribusiness firm China National Cereals, Oils and Foodstuffs Corp (COFCO) took control of fellow State-owned firm China Huafu Trade and Development Group.

Dec 30, 2014 Train makers CSR Corporation Limited and CNR Corporation Limited announced their merger plan. CNR was delisted on May 20, 2015, and the shares of the new company, CRRC, began trading on Monday.

May 29, 2015 Major nuclear power operator China Power Investment Corp (CPIC) and State Nuclear Power Technology Corp (SNPTC) said they are combining into a new company and the matter was approved by the State Council, China's cabinet.

source: http://www.globaltimes.cn